Hexo Corp Provides Preliminary Q4 Revenue Miss, Rescinds 2020 Guidance

Hexo Corp (TSX: HEXO) (NYSE: HEXO) announced preliminary revenue figures this morning for its fourth quarter of fiscal 2019 of $14.5 to $16.5 million, far short of previous guidance of $25 million iterated for the three month period. The firm also rescinded its prior issued guidance of $400 million in revenues for fiscal 2020.

The drop in revenue and guidance is largely a result of poor product sell through. Translated, it simply means that Hexo’s product isn’t leaving store shelves as fast as they had anticipated. The firm blamed a number of issues at hand for the missed guidance, including slower than expected store rollouts, a delay in government approval for cannabis derivative products, and early signs of pricing pressure – items that many investors have been discussing at end for a number of months now.

As a result of the preliminary sales, Hexo Corp is anticipating revenues for fiscal 2019 to come in between $46.5 and $48.5 million.

While we are disappointed with these results, we are making significant changes to our sales and operations strategy to drive future results. Over the past quarter, we began re-configuring our operations to focus on high-selling strains and initiated a new sales strategy that we believe will meaningfully improve performance.

Sebastien St-Louis, CEO and co-founder of HEXO Corp

The announcement of missed and cancelled guidance comes on the heals of Chief Financial Officer Michael Monahan stepping down earlier this week after just a few short months on the job. While the company had indicated it was due to personal commitment reasons, the market was skeptical on this justification, apparently for good reason. That announcement had lead Bank of America Merrill Lynch to double downgrade the stock, and drop its price target on the Quebec-based operation from $9 to $4.

Commenting on the drop at the time, analyst Christopher Carey had prophetically stated, “Put simply: a departure that is so abrupt, from a person with CFO experience at other public companies, is concerning, and in our view will leave investors guessing ‘what don’t we know?’ for some time.”

Hexo Corp is expected to release full financial results for the fourth quarter before the bell on October 24, 2019. Shares are currently down 22.55% in pre market trading from yesterdays close of $3.68 on the New York Stock Exchange.


Information for this briefing was found via Sedar and Hexo Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Jay

As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive's stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.

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